An extremist, not a fanatic

October 13, 2006

Beautiful women and economics

If there were three beautiful, naked women standing in front of you,
which one would you pick? And does this have any relevance to
economics?

Here's my answer.Orthodox economics says the question has little relevance. It regards tastes as given and beyond analysis, as the slaves of the passions. But orthodox economics is wrong.First, most men would choose the woman who gives them the come-on, rather than the most beautiful one who doesn't. Our choice, then is partly determined by the opportunity set. This is especially true if a man has had a run of bad luck with the ladies, which reduces his expectations. In both cases, choice is not necessarily a guide to what we really want. Instead, society shapes our preferences - not just vice versa - as Jon Elster has shown. Secondly, what men value in women might not be women as such, but particular qualities of them: norkage, hair colour, (ahem) personal grooming, likelihood of banging like a Grimsby tugboat engine, ability to converse well in the intervals between shagging. Indeed, it's possible that men's preferences across women are the same, and differences are due only to different values placed upon these features. This leads to theories of hedonic pricing. These raise practical and philosophical issues: is consumer price inflation over-stated and therefore the long-term rise in living standards understated? Is there such a thing as a true, theory-free macroeconomic aggregate?Thirdly, some qualities women have (the ability to bang like a GTE) are experience goods - we can't know them in advance. This is another reason why we might not choose the woman we would like most. In conditions of imperfect information, choices don't always maximize our welfare. In extreme cases, imperfect - and asymmetrical - information can lead to acute market failure, as George Akerlof showed in his story of the market for lemons. Fourthly, having sampled one woman, many men would prefer another, even if they are not disappointed by the experience good. Are such unstable preferences a sign of irrationality? Or are they because men value variety? The question matters. It shows that, in order to judge whether someone is rational or not, we must know what it is they are trying to maximize.Fifthly, over a particular range, men are not always sensitive to financial incentives. I have a strong preference for (say) Kelly Brook over Kate Moss. I would need big money to take Kate Moss. Financial inentives matter, then, but only at the margin. And many of us are a long way from the margin. Sixthly, there might be no such thing as a collective preference. For example, given a choice of Kate Moss, Kathy Sykes and Kelly Brook, my preference ranking is: 1 = Kathy, 2 = Kelly, 3 = Kate. One of my colleague's ranking is: 1 = Kate, 2 = Kathy, 3 = Kelly. And another colleague's is: 1 = Kelly, 2 = Kate, 3 = Kathy.So, whom do we collectively prefer? It's impossible to say for certain, unless we can measure interpersonal rankings, so we can judge whether my preference for Kathy over Kelly is stronger than my colleague's preference for Kelly over Kathy. If we can't do this - that is, if crude utilitarianism does not apply - we are in a world of Arrow's impossibility theorem. This shows that social choice is not the straightfoward thing our politicians sometimes claim it to be.

Hmm. If they start offering you bribes and one of them promises you, if you pick her, the most beautiful woman in the world as your wife, do make sure that the girl you're being offered isn't already married to the King of Sparta. No good will come of it.

so Oxbridge are back to asking weird questions to find the best applicants. "Top" public schools and state schools will train their applicants to answer these questions, but the rest, used to a more mundate diet of state school fare, will be thrown, not do well, and fail to get in. And so the system of privilege perpetuates itself ...

The point of asking 'weird questions,' surely, is that they test your ability to think on your feet and to marshal the knowledge you've got to think creatively and answer a question you've never been asked before. I'm not sure to what extent a school can train people to do that, as opposed, perhaps, to encouraging them so to do.

Not Saussure - yes but you can be taught to think on your feet (I've got a few examples from various situations which I'll produce if desired) and the problem with state schools is that increasingly they are aimed at producing good results for the masses (nothing wrong with that) and not producing excellent results for the few.

Dipper -- I agree you can be taught to think on your feet. However, I don't think this valuable skill is one only an elite can acquire; there's nothing to stop teachers in state schools setting their A level candidates original and challenging essay topics or raising them in class discussion, is there?

As Chris has demonstrated above, the question's inviting people to take what they know about economic theory by asking them to apply it in a novel context rather than to reproduce what they've been told about how it applies in given situations. Why's it difficult for teachers in state schools to do that?

not Sausure - yes I completely agree and I'm sure there are lots of teachers who do just that. But the system does not reward them for doing it as it is focussed on obtaining maximum results across a range of not particularly stretching exams. Increasing numbers of A grades at A level mean the excellent cannot be distinguished from the very good. So Oxbridge resorts to other methods. Public schools and others then train for this, and the result has been a drop in state school pupils at Oxford and Cambridge. Well done New Labour.

Of course, one could learn to think on one's feet by arguing with adults or the brighter of one's fellow pupils. Or even shouting at the telly. Must everything be blamed on the poor bloody schoolteacher?

I suppose the only completely unbiased way of allocating the very limited number of places available to read PPE or whatever would be to take the names of all the suitably qualified applicants and draw the winners out of a hat. Not sure this would commend itself to everyone, though.

dearieme I have no idea how you interpret my comments as being a complaint about teachers when it clearly blames the government. Please explain.

Now here's an example. I know of an A-level student at state school in mid-wales who wishes to study maths at University. However, Further Maths tuition is not available at his school, so he can only do a single Maths A-level. Now Cambridge does not regard A-level results in maths as sufficient proof of mathematical ability, so it requires Further Maths A-level as well. So this student is effectively barred from even being a candidate at Cambridge.

Surely it should be axiomatic that the education available to everyone in the country is of a sufficient standard to allow access to the top Universities for those able enough to go? At least all the sufficiently able candidates should be able to get their name in the hat?

Dipper, "they are aimed at producing good results for the masses (nothing wrong with that) and not producing excellent results for the few". If you didn't intend that as a criticism of the teachers, then you shouldn't have used the bloody passive, should you? Cambridge, of course, has the duty not to admit people who it thinks likely to fail, so it doesn't want under-qualified students: what the hells wrong with that? If the pols who run mid-Wales wish to exclude their young from Cambridge, so be it; the electors should throw them out.

"Increasing numbers of A grades at A level mean the excellent cannot be distinguished from the very good. So Oxbridge resorts to other methods. Public schools and others then train for this, and the result has been a drop in state school pupils at Oxford and Cambridge. Well done New Labour."

The problem you describe stems from the use of grade-related criteria in marking schemes. We have it in Scotland too. Not a New Labour invention - it was introduced under the Tories. Solution would be simply to drop GRCs - then Oxford, and most teachers, would be much happier. Sorted.

I did biology at Oxford. This question works for me. First of all, it would probably get a laugh out of the nervous candidate, thereby relaxing them. Secondly, it would be a great intro into a discussion about primary and seconday sexual characteristics, how norkage is a signal of reproductive health, mate preference, etc.

You sillies. You forgot one of the most important questions: is the "you" writing the essay male or female? And if female, is she straight? Further, if male, is he gay?

That relevance to economics is that analysts and companies can (and do) make huge market mistakes when their assumptions blinker their business models. Contemplating even the idea of three beautiful, naked women obviously affects the judgment of men so much that they are inhibited from seeing the most obvious factor in the equation.